The domestic newsprint industry has implemented its committed adjustment plans, but inadequate safeguard duty protection, declining demand due to digitalization and the pandemic have dealt final blow to the local industry.
The Tariff Commission reached this conclusion in its final evaluation report on the “Effectiveness of actions taken by the Philippine Newsprint Industry to Facilitate its Positive Adjustment to Import Competition” the industry committed to implement to be competitive against imports following the imposition of the three-year safeguard measure on imported newsprint for the period 2015-2018.
Based on its findings, the TC noted the industry position as represented by Trust International Paper Corp. (TIPCO) partly blaming the past leadership of the Department of Trade and Industry (DTI) for the current state of the domestic industry as it only granted small safeguard duty protection than what was recommended.
The TC recommended a specific duty of P2,470 per MT as the form of safeguard measure, but DTI did not heed the Commission’s recommendation and came out with its own computation/s of only P980/ MT for the first year, P800/MT for the second year, and P 640/MT for the third year.
Despite the lower tariff protection, TC said that TIPCO has implemented almost all its adjustment measures except for the Pulper Upgrade, which was put on hold. TIPCO said the project could have been realized if the Commission’s recommended safeguard duty was implemented. “The lower final safeguard duty imposed by DTI forced the company to delay the implementation of this project,” it said.
The safeguard duty on newsprint implemented from mid-2015 to mid-2018 helped regulate newsprint importation. During this period, the volume of importation went down from 59,801 MT to 23,198 MT. The domestic industry’s market share also improved from 33 percent to 62 percent.
The measures implemented also allowed the industry in 2017 and 2018 to become the dominant player in the market, increase its production and sales, improve its capacity utilization, manage its manufacturing costs, grow labor productivity, and improve its price competitiveness vis-à-vis imports. If no safeguard measures were imposed, the domestic industry would not have been able to invest more easily in the implementation of efficiency measures and would not have attained the gains from the effectiveness of the actions taken.
But when the tariff protection was lifted in May 2018, imports increased and cut into the market share of the domestic industry; production, sales and labor productivity declined, and the gap between domestic selling prices and the landed costs of imported newsprint widened.
Also, the drastic global shift in consumer preference from print media to digital media removed newsprint as a major segment of the paper industry. With this, TC said the domestic industry will find it difficult to produce at levels that will allow it to achieve economies of scale and increase its ability to compete against imports.
TC said that the industry would have also filed for the extension of the safeguard measure if the recommended duty of the Commission was followed. “However, the estimated P500/MT for the 4th year would be too small to deter foreign mills from exporting their excess production to the Philippines,” said TC.
The latest blow to the industry was the COVID-19 pandemic. The industry projected very little market demand for their products in the foreseeable future and continued operations will no longer be viable.
Hence, TIPCO made the very difficult decision of shutting down and closing all manufacturing operations on 30 June 2020. “The death of the industry could have been delayed or prevented if other government agencies upheld the recommendation of the Commission,” the TC report noted.
From 5 local manufacturers of newsprint 2013, only two were left in 2021. One newspaper mill closed while three others opted to concentrate on the manufacture of their main paper products (not newsprint). But TC said there is a new player implying some growth prospects for the industry. More importantly, there is an assurance of continuing local availability of newsprint.
In conclusion, the TC said that while the industry undertook measures to improve production efficiency and increase output and was effective in terms of enhancing its competitive position during the period of imposition of the safeguard measures, “market developments have negated newsprint industry gains and rendered its future growth as largely unsustainable. The economic consequences of the 2020 pandemic have also taken its toll.”
Nevertheless, TC said that the existence of mills with capacity to produce newsprint can be said to augur well in terms of assuring continuing local supply as well as shields the country from complete reliance on imports. A domestic paper industry would still thrive albeit with lesser production of newsprint as demanded by the market, it added.